Don't mandate insurance, deregulate healthcare

Ivo Vegter

Ivo Vegter

Ivo Vegter is a columnist and the author of Extreme Environment, a book on environmental exaggeration and how it harms emerging economies. He writes on this and many other matters, from the perspective of individual liberty and free markets. He is seldom wrong.

30 Aug 2011 07:50 (South Africa)

Instead of furthering healthcare by the alacrity with which it gets out of the way, government is heaping regulation upon central-planning regulation in the hope of bringing affordable healthcare to all. It will fail.

I knew, within hours, that the case was serious. Curled up in bed, the gastro-enteritis was killing me quickly, though not painlessly.

“To the hospital!” I bade a helpful neighbour. I knew exactly what I needed: a rehydration drip, infused with an anti-emetic, anti-spasmodic, and maybe some vitamin B. “Jet fuel”, as the army medics used to call it. Afterwards, an anti-biotic just in case. For this, including swabs, needles, drugs, and all the other paraphernalia of an intravenous drip, I was charged R100.

The bill, however, came to R1,220. First, the hospital charged R560 for the use of their emergency room. Then the doctor, for a five-minute consultation, charged a weekend-premium rate of R560.

All of which made me wonder why I was paying such a hefty fee when I knew what was wrong with me, knew the treatment, and could easily have administered the medication myself. If a vein proved too hard to find in my dehydrated state, I could have called on a friend with some first-aid experience, who could have inserted the drip for me.

“You'll get sepsis!” came the reply. Maybe, if I'm not careful, but I'm also likely to pick up drug-resistant superbugs in hospital. Besides, if I wasn't sure of my own competence, it would have been easy to buy that skill for the price of a beer or two. Judging by heroin junkies, it can't be that hard to stick a needle into a vein. Personal medical courses would be much more popular if it were legal to use them to save money.

“It might have been something much more serious!” came another reply. That's true, but that's also true when I take paracetamol for a headache, or aspirin for a fever. Unbeknownst to me, I might have brain cancer, or malaria, or my liver and kidneys might not be up to handling the drugs. Why, in one case, does the government concede that the risk is mine to take, but in another case not? That's inconsistent, which casts doubt on the case for limiting my rights.

More importantly, why, if I decide not to take the risk but to seek professional help, should I be limited to government-licenced doctors that can charge ridiculous fees for very elementary assistance?

There's no reason the state needs to licence doctors. Private institutions can do this, just as private institutions certify a host of other professionals. Qualifications and reputation can rank doctors just as well – or indeed better – than a licensing regime.

Take mechanics as an example. Need to take your car in for a repair? You can choose: use a mechanic who was trained and certified by the maker of your car, or take the risk and use someone else. That someone else will probably have been recommended to you by a friend or family member who has had competent service from them. Either way, the risk is entirely yours to take. If it all ends badly, you have legal recourse, and that mechanic's reputation will soon be in tatters.

If the same were true of doctors, patients would judge them by their qualifications, their reputation, and their price. Competition would have driven down the price of my medical care by many hundreds of rands.

The government claims to be concerned about the cost of medical care and its availability to the people. It, however, proposes not to give us more options, but to do the opposite. Instead of freeing up the market, it proposes to restrict it into a one-size-fits-all scheme of mandatory health insurance.

The problem with this is that those people who aren't already insured for day-to-day medical care probably can't afford it. They still won't be able to afford it if the government makes insurance a legal requirement. Therefore, insurance prices will have to be controlled. This will inevitably result in longer queues, rationing of healthcare, and lower quality.

Worse, all this obligatory insurance and mandated coverage will give patients no incentive to avoid using the healthcare system because of its cost. You've paid already, so why not go to the doctor with a chest infection, rather than just getting something from the local pharmacy and spending a day or two in bed?

A television station once did an interview with a woman in a country where medical care is “free”. By “free”, they mean taxpayers pay for it, and there is no additional cost for seeing a doctor. This woman, who claimed to be healthy, was asked how often she sees a doctor. “Oh, only once a week, maybe,” she replied. Now why, for the love of sanity, should other people pay for her loneliness and hypochondria? And in what world do politicians think that this does not drive up the cost of healthcare?

Besides for the queues and rationing that will be inevitable under a price-control regime, and the abuse of the system that will be inevitable under mandatory insurance, there are further risks.

The cost of private top-up care will skyrocket, because demand for it will drop as a result of mandatory insurance. If the well-to-do discover that they can no longer afford the best medical care as a result, they may leave. They may not want to emigrate, but the health of their children may well trump their love for South Africa. And with them, they will take their spending, their contribution to tax, and the money that might have been income for healthcare providers.

With all the known downsides of a single-payer national healthcare system even in rich countries, and the proven limitations of our own government bureaucracy in providing services such as electricity or policing, why not approach the problem from a new angle?Let doctors – along with traditional healers and homeopathic charlatans – operate in a free market. Let patients be the judge of their skills, service, results and prices.

There are always objections to this. One is that you may not be in a position to negotiate with a profit-driven doctor if you're delirious, unconscious, or in urgent need of life-saving treatment. Easiest solution? Sign a contract with a hospital chain that guarantees you a certain financial deal and a given level of service in advance.

Another is that the very poor will not be catered for. This is not true. There are plenty charitable institutions that will happily provide medical care to those who truly cannot afford to pay for it. In fact, hospitals will probably compete for business by marketing how much they do for the poor. Others may offer basic emergency services for free, in the hope of winning business from competitors.

Another is that patients don't know what's best for them, and are easily taken in. That's no justification for central planning, however. Every time you hire a professional, you do so because you don't know what's best. A lawyer is better qualified to draft your contracts, and a builder better qualified to fix your house. Will they try to rip you off? Perhaps. But there are perfectly adequate solutions for this. First, there's reputation. If a roofing specialist can't stop leaks, or a mechanic replaces parts that don't need replacing, word is going to get out.

Second, the media exists to tell readers about their risks and their options. Journalists would expose frauds and quacks, just like they do in, say, the restaurant industry, or the technology industry, or indeed any other free-market industry. Third, there's always legal recourse if you suffered damages.

In a private healthcare market, some people will buy insurance. Others will pay-as-you-go, or join “stokvel” style organisations. This will be influenced not only by how rich they are, but also by their lifestyles. An obese person will have very different requirements from an adventure sports enthusiast. A mother will not want the same as a single guy. Someone with an extended family or close-knit community will have different needs from an urban loner.

Let people buy insurance only for what they need, or let them take the risk themselves if they don't want the insurance. And then let doctors compete with each other both on quality of service and price.

This will bring down the cost of healthcare, and give people incentives to stay healthy. It will make a greater quantity and variety of options available to patients. It will reward those patients who don't place an undue burden on the available healthcare market – as I did when I occupied a hospital bed that could have much better served someone in more urgent need of care.

Ultimately, it will leave patients free to make their own decisions about their own bodies. That is important. Because once the state takes on the responsibility of providing healthcare, it has an excuse to regulate our health and lifestyle. Health and safety regulations are expanding rapidly. Ask any Briton how petty, invasive and costly such regulatory interference can become. If a government that takes responsibility for your health can force you to wear a cycling helmet or ban recreational drugs, why can't it force you to buy a gym contract and police your use of it?

We can choose. Either we live in a country that mouths well-intended platitudes about affordable healthcare for all, but imposes measures that fail to do so, and compounds the error by restricting our liberties, invading our privacy, and burdening our economy with regulations. That way we get poorer.

Or we live in a country that furthers the healthcare enterprise, in the words of Henry David Thoreau, by the alacrity with which the government gets out of the way. That way we get richer.

And if you don't believe this, remind me again why R100 worth of medical supplies, which I could specify by name before setting foot in hospital, cost R1120 to administer? And remind me again why I had no satisfactory legal alternatives? DM

Ivo Vegter is a columnist and the author of Extreme Environment, a book on environmental exaggeration and how it harms emerging economies. He writes on this and many other matters, from the perspective of individual liberty and free markets. He is seldom wrong.

Ivo Vegter is a columnist and the author of Extreme Environment, a book on environmental exaggeration and how it harms emerging economies. He writes on this and many other matters, from the perspective of individual liberty and free markets. He is seldom wrong.

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